Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statement
This Quarterly Report on Form 10-Q (Form 10-Q) contains certain forward-looking
information relating to CA, Inc. (which we refer to as the "Company,"
"Registrant," "CA Technologies," "CA," "we," "our" or "us"), that is based on
the beliefs of, and assumptions made by, our management as well as information
currently available to management. When used in this Form 10-Q, the words
"believes," "plans," "anticipates," "expects," "estimates," "targets" and
similar expressions are intended to identify forward-looking information.
Forward-looking information includes, for example, the statements made in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A), but also appears in other parts of this Form 10-Q. This
forward-looking information reflects our current views with respect to future
events and is subject to certain risks, uncertainties, and assumptions.
The declaration and payment of future dividends is subject to the determination
of the Company's Board of Directors, in its sole discretion, after considering
various factors, including the Company's financial condition, historical and
forecast operating results, and available cash flow, as well as any applicable
laws and contractual covenants and any other relevant factors. The Company's
practice regarding payment of dividends may be modified at any time and from
time to time.
Repurchases under the Company's stock repurchase program are expected to be made
with cash on hand and may be made from time to time, subject to market
conditions and other factors, in the open market, through solicited or
unsolicited privately negotiated transactions or otherwise. The program, which
is authorized through the fiscal year ending March 31, 2014, does not obligate
the Company to acquire any particular amount of common stock, and it may be
modified or suspended at any time at the Company's discretion.
A number of important factors could cause actual results or events to differ
materially from those indicated by forward-looking statements, including: the
ability to achieve success in the Company's strategy by, among other things,
effectively rebalancing the Company's sales force to increase penetration in
growth markets and with large enterprises that have not historically been
significant customers, enabling the sales force to sell new products, improving
the Company's brand in the marketplace and ensuring the Company's set of cloud
computing, Software-as-a-Service and other new offerings address the needs of a
rapidly changing market, while not adversely affecting the demand for the
Company's traditional products or its profitability; global economic factors or
political events beyond the Company's control; general economic conditions and
credit constraints, or unfavorable economic conditions in a particular region,
industry or business sector; the failure to adapt to technological changes and
introduce new software products and services in a timely manner; competition in
product and service offerings and pricing; the failure to expand partner
programs; the ability to retain and attract adequate qualified personnel; the
ability to integrate acquired companies and products into existing businesses;
the ability to adequately manage and evolve financial reporting and managerial
systems and processes; the ability of the Company's products to remain
compatible with ever-changing operating environments; breaches of the Company's
software products and the Company's and customers' data centers and IT
environments; discovery of errors in the Company's software and potential
product liability claims; the failure to protect the Company's intellectual
property rights and source code; risks associated with sales to government
customers; access to software licensed from third parties; risks associated with
the use of software from open source code sources; access to third-party code
and specifications for the development of code; third-party claims of
intellectual property infringement or royalty payments; fluctuations in the
number, terms and duration of the Company's license agreements as well as the
timing of orders from customers and channel partners; the failure to renew large
license transactions on a satisfactory basis; changes in market conditions or
the Company's credit ratings; fluctuations in foreign currencies; the failure to
effectively execute the Company's workforce reductions; successful outsourcing
of various functions to third parties; events or circumstances that would
require us to record a goodwill impairment charge; potential tax liabilities;
acquisition opportunities that may or may not arise; and other factors described
more fully in this Form 10-Q and the Company's other filings with the Securities
and Exchange Commission. Should one or more of these risks or uncertainties
occur, or should our assumptions prove incorrect, actual results may vary
materially from those described in this Form 10-Q as believed, planned,
anticipated, expected, estimated, targeted or similarly expressed in a
forward-looking manner. We do not intend to update these forward-looking
statements, except as otherwise required by law. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. This MD&A is provided as a supplement to, and should be read in
conjunction with, our financial statements and the accompanying notes to the
financial statements. References in this Form 10-Q to fiscal 2013 and fiscal
2012 are to our fiscal years ending on March 31, 2013 and 2012, respectively.

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OVERVIEW
We are the leading independent enterprise information technology (IT) management
software and solutions company with expertise across a wide range of IT
environments. We develop and deliver software and services that help
organizations accelerate, transform and secure their IT infrastructures to
deliver flexible IT services. This allows customers to respond faster to
business demands for new services, manage the quality of services, increase
efficiency and reduce risk. Our products and solutions are designed to operate
in a wide range of IT environments - from mainframe and physical to virtual and
cloud.
We license our products worldwide. We serve companies across most major
industries around the world, including banks, insurance companies, other
financial services providers, government agencies, telecommunication providers,
manufacturers, technology companies, retailers, educational organizations and
health care institutions. These customers typically maintain IT infrastructures
across platforms, from physical to virtual and cloud, and from multiple vendors.
These environments are complex and critical to our customers' operations.
As business demands increase and new technologies evolve, demands on IT continue
to increase. Organizations expect more from technology and many want to use IT
to gain a competitive edge. This means companies are using IT to deliver
products to market faster, reach new customers and respond to changes in the
competitive environment. To achieve their desired business outcomes and gain
business advantages, many organizations are improving the efficiency, mobility
and availability of their IT resources and applications by adopting
next-generation technologies like virtualization and cloud computing and
consuming IT as Software-as-a-Service (SaaS). They are also extending their
legacy physical environments to virtual and cloud environments. Virtualization
lets users run multiple virtual machines on each physical machine. Cloud
computing is a shared pool of computing resources that can be accessed,
configured and used as needed. With SaaS, customers can obtain software on a
subscription, "pay-as-you-go" model.
While these technologies can reduce operating costs tied to physical
infrastructure, this evolution in computing is a transformative opportunity that
is also making IT environments more complex. Data centers are evolving to
include mainframes, physical servers, virtualized servers and private, public
and hybrid (a combination of public and private) cloud environments.
We believe it is vital for companies to effectively accelerate, transform and
secure all of their various computing environments, while being able to deliver
new services quickly based on their business needs. Our core strengths in IT
management and security, combined with our investments in innovative
technologies, position us to serve a range of customers which we divided into
three customer segments in the fourth quarter of fiscal 2012: (1) approximately
1,000 core large existing enterprise customers with annual revenue in excess of
$2 billion (Large Existing Enterprises), which currently account for
approximately 80% of our revenue; (2) enterprises with revenue in excess of $2
billion that have not historically been significant customers of ours (Large New
Enterprises), a customer segment that we believe includes 4,500 potential new
customers but where we intend to initially focus on approximately 1,000 of these
customers selected based on our current geographical and vertical strengths; and
(3) approximately 7,000 enterprises with revenue between $300 million and $2
billion and in fast growing geographies like Latin America and Asia (Growth
Markets). During the first quarter of fiscal 2013, we made organizational
changes to allow us to focus better on our customer segmentation. Key aspects of
these changes include: consolidating all disciplines associated with our Growth
Markets initiatives into one general manager, consolidating our business
operations into our finance team, enhancing the processes for evaluating sales
opportunities by region and customer segment and increasing executive oversight
over key transactions. In addition, we introduced new products and solutions
during the second quarter of fiscal 2013 and we expect to introduce new products
and solutions throughout the second half of fiscal 2013 that we believe should
create selling opportunities across all customer segments. All these efforts are
designed to accelerate new product sales outside of our contract renewal cycle.
We believe by targeting these customer segments, we are more than doubling our
total addressable market. Our customer segmentation initiative has taken longer
than anticipated to gain traction. As part of this initiative, we have also
developed a new management process intended to improve the visibility and
quality of our pipeline. We believe that these initiatives will benefit our
performance in the long-term.
Our broad and deep portfolio of software solutions addresses customer needs
across computing platforms. We deliver these solutions on-premises or, for
certain products, using SaaS. During fiscal 2012, we began an effort to more
fully realize the value of our intellectual property by strategically licensing
and/or assigning selected assets within our portfolio. This effort is intended
to better position us in the marketplace and allow us the flexibility to
reinvest in improving our overall business.

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EXECUTIVE SUMMARY
The following is a summary of the analysis of our results contained in our MD&A
for the second quarter of fiscal 2013.
Total revenue for the second quarter of fiscal 2013 decreased 4% to $1,152
million compared with $1,200 million in the year-ago period, primarily due to an
unfavorable foreign exchange effect. Within total revenue there was a decrease
in subscription and maintenance revenue, which was partially offset by an
increase in software fees and other revenue. Excluding the foreign exchange
effect, revenue for the second quarter of fiscal 2013 was flat compared with the
second quarter of fiscal 2012. Due to our performance in the first half of
fiscal 2013, the macro-economic environment in which we believe customers are
elongating their sales cycles, and the expectation of delaying the closing of
some transactions in our pipeline until later in fiscal 2013 and after fiscal
2013, we currently expect a year-over-year decrease in total revenue for fiscal
2013 compared with fiscal 2012.
Total bookings in the second quarter of fiscal 2013 decreased 14% compared with
the year-ago period to $837 million primarily due to a year-over-year decline in
enterprise solutions new product and mainframe capacity sales, and to a lesser
extent subscription and maintenance renewals and professional services bookings.
These decreases were partially offset by an increase in software fees and other
bookings, which are recognized as software fees and other revenue. Total new
product and mainframe capacity sales in the second quarter of fiscal 2013
declined by approximately 25% compared with the second quarter of fiscal 2012.
Within these bookings, enterprise solutions new product sales and mainframe
capacity sales decreased, while mainframe new product sales increased slightly
from the year-ago period. Mainframe capacity sales were negatively affected by
lower mainframe renewals because renewals are an important opportunity to sell
additional mainframe capacity. Enterprise solutions new product sales were
affected by lower than expected sales outside of a renewal. In addition,
mainframe capacity and enterprise solutions new product sales were negatively
affected by a difficult macroeconomic environment, in which we saw our customers
become cautious with capacity purchases, elongate sales cycles and move deals
outside of the quarter. We now expect our fiscal 2013 renewal portfolio to
decline by approximately 10% compared with fiscal 2012. We expect our fiscal
2013 third quarter renewals to decrease year-over-year and our fiscal 2013
fourth quarter renewals to increase year-over-year. For the second quarter of
fiscal 2013, our percentage renewal yield was in the high 80s, which is slightly
lower than historical levels primarily as a result of two transactions.
Total expenses before interest and income taxes of $815 million for the second
quarter of fiscal 2013 decreased 6% compared with $867 million in the second
quarter of fiscal 2012. Total expenses for the second quarter of fiscal 2013
decreased compared with the second quarter of fiscal 2012 as a result of $44
million in severance costs incurred in the year-ago period that were associated
with our fiscal 2012 workforce reduction (Fiscal 2012 Plan). In addition, the
year-over-year decrease in expenses was partially attributable to a favorable
effect of foreign exchange on operating expenses and a decrease in commission
expense within selling and marketing expenses.
Income from continuing operations before interest and income taxes increased $4
million, or 1%, in the second quarter of fiscal 2013 compared with the year-ago
period.
Income tax expense increased $14 million for the second quarter of fiscal 2013
compared with the year-ago period as a result of favorable discrete items that
occurred in the second quarter of fiscal 2012 but did not reoccur in the second
quarter of fiscal 2013.
Diluted income from continuing operations per share for the second quarter of
fiscal 2013 was $0.48, compared with $0.47 in the year-ago period, reflecting an
increase in operating income as a result of the decrease in operating expenses
and our repurchases of common shares.
For the second quarter of fiscal 2013, our segment performance results were as
follows:
Mainframe Solutions revenue for the second quarter of fiscal 2013 decreased $36
million from the year-ago period primarily due to an unfavorable foreign
exchange effect of $25 million and a decrease in subscription and maintenance
revenue, which is attributable to a decrease in subscription and maintenance
bookings due to lower new product and mainframe capacity sales in prior periods.
Mainframe Solutions operating margin for the second quarter of fiscal 2013 was
favorably affected by a decrease in severance costs associated with the Fiscal
2012 Plan, which were incurred in the second quarter of fiscal 2012, and from
the favorable effect of foreign exchange.
Enterprise Solutions revenue for the second quarter of fiscal 2013 decreased $11
million from the year-ago period, due to an unfavorable foreign exchange effect
of $14 million compared with the year-ago period. Within Enterprise Solutions
revenue, there was a decrease in service assurance and data management products,
partially offset by an increase in revenue from our SaaS, ITKO and security
products. Enterprise Solutions operating margin was favorably affected by a
decrease in severance costs associated with the Fiscal 2012 Plan, which were
incurred in the second quarter of fiscal 2012. This decrease in expenses was
partially offset by our additional investments in ITKO and Nimsoft products. As
a result of the decrease in expenses, Enterprise Solutions operating margin for
the second quarter of fiscal 2013 remained consistent with the year-ago period.

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Services revenue and expenses for the second quarter of fiscal 2013 were
consistent with the second quarter of fiscal 2012. Operating margin for Services
increased to 6% in the second quarter of fiscal 2013 compared with 4% in the
second quarter of fiscal 2012 as a result of the slight reduction in expenses.
Total revenue backlog of $7,460 million at September 30, 2012 decreased 8%
compared with $8,067 million at September 30, 2011. The current portion of
revenue backlog of $3,453 million at September 30, 2012 decreased by 3% compared
with the balance of $3,546 million at September 30, 2011. Revenue backlog in the
quarter was unfavorably affected by a decline in year-over-year bookings
performance. We expect a continued decline in revenue backlog year-over-year
through fiscal 2013 prior to an expected increase in our renewal portfolio in
fiscal 2014. Generally, we believe that a change in the current portion of
revenue backlog on a year-over-year basis is an indicator of future subscription
and maintenance revenue performance due to the high percentage of our revenue
that is recognized from license agreements that are already committed and being
recognized ratably.
Cash provided by continuing operating activities for the second quarter of
fiscal 2013 was $89 million, representing a decrease of $101 million compared
with the second quarter of fiscal 2012. The decrease was primarily due to a
decrease in cash collections of $142 million that was attributable to lower new
product sales in the first quarter of fiscal 2013 that negatively affected
billings for the second quarter of fiscal 2013. Due to our performance in the
first half of fiscal 2013, the macro-economic environment in which we believe
customers are elongating their sales cycles, and the expectation of delaying the
closing of some transactions in our pipeline until later in fiscal 2013 and
after fiscal 2013, we currently expect lower billings and collections for fiscal
2013 compared with fiscal 2012. As a result, we expect a year-over-year decrease
in cash flows from operations for fiscal 2013 compared with fiscal 2012.

(1) At September 30, 2012 and March 31, 2012, investments were $162 million and
less than $1 million, respectively. At September 30, 2011, investments were
$179 million.

(2) Refer to the discussion in the "Liquidity and Capital Resources" section of
this MD&A for additional information on expected future cash collections
from committed contracts, billings backlog and revenue backlog.

Analyses of our performance indicators shown above and segment performance can
be found in the "Results of Operations" and "Liquidity and Capital Resources"
sections of this MD&A.
Total Revenue - Total revenue is the amount of revenue recognized during the
reporting period from the sale of license, maintenance and professional services
agreements. Amounts recognized as subscription and maintenance revenue are
recognized ratably over the term of the agreement. Professional services revenue
is generally recognized as the services are performed or recognized on a ratable
basis over the term of the related software license. Software fees and other
revenue generally represents license fee revenue recognized at the inception of
a license agreement (up-front basis) and also includes our SaaS revenue, which
is recognized as services are provided.
Total Bookings - Total bookings or sales includes the incremental value of all
subscription, maintenance and professional services contracts and software fees
and other contracts entered into during the reporting period and is generally
reflective of the amount of products and services during the period that our
customers have agreed to purchase from us. Revenue for bookings attributed to
sales of software products for which license fee revenue is recognized on an
up-front basis is reflected in "Software fees and other" in the Condensed
Consolidated Statements of Operations.
As our business strategy has evolved, our management also looks within bookings
at total new product and capacity sales, which we define as sales of products or
mainframe capacity that are new or in addition to products or mainframe capacity
previously contracted for by a customer. The amount of new product and capacity
sales for a period, as currently tracked by us, requires estimation by
management and has not been historically reported. Within a given period, the
amount of new product and capacity sales may not be material to the change in
our total bookings or revenue compared with prior periods. New product and
capacity sales can be reflected as subscription and maintenance bookings in the
period (for which revenue would be recognized ratably over the term of the
contract) or in software fees and other bookings (which are recognized as
software fees and other revenue in the current period).
Subscription and Maintenance Bookings - Subscription and maintenance bookings is
the aggregate incremental amount we expect to collect from our customers over
the terms of the underlying subscription and maintenance agreements entered into
during a reporting period. These amounts include the sale of products directly
by us and may include additional products, services or other fees for which we
have not established vendor specific objective evidence (VSOE). Subscription and
maintenance bookings also includes indirect sales by distributors and volume
partners, value-added resellers and exclusive representatives to end-users,
where the contracts incorporate the right for end-users to receive unspecified
future software products, and other contracts without these rights entered into
in close proximity or contemplation of such agreements. These amounts are
expected to be recognized ratably as subscription and maintenance revenue over
the applicable term of the agreements. Subscription and maintenance bookings
exclude the value associated with certain perpetual licenses, license-only
indirect sales, SaaS offerings and professional services arrangements.
The license and maintenance agreements that contribute to subscription and
maintenance bookings represent binding payment commitments by customers over
periods that range generally from three to five years, although in certain cases
customer commitments can be for longer or shorter periods. These current period
bookings are often renewals of prior contracts that also had various durations,
usually from three to five years. The amount of new subscription and maintenance
bookings recorded in a period is affected by the volume, duration and value of
contracts renewed during that period. Subscription and maintenance bookings
typically increases in each consecutive quarter during a fiscal year, with the
first quarter having the least bookings and the fourth quarter having the most
bookings. However, subscription and maintenance bookings may not always follow
the pattern of increasing in consecutive quarters during a fiscal year, and the
quarter-to-quarter differences in subscription and maintenance bookings may
vary. Given the varying durations of the contracts being renewed, year-over-year
comparisons of bookings are not always indicative of the overall bookings trend.

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Generally, we believe that a change in the current portion of revenue backlog on
a year-over-year basis is an indicator of future subscription and maintenance
revenue performance due to the high percentage of our revenue that is recognized
. . .